Host Marriott 2004 Annual Report - Host Hotels & Resorts, Inc

The following table is a summary of the status of our stock
option plans that have been approved by our stockholders for the
three years ended December 31, 2004. We do not have stock
option plans that have not been approved by our stockholders.
2004 2003 2002
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(IN MILLIONS) PRICE (IN MILLIONS) PRICE (IN MILLIONS) PRICE
Balance, at beginning of year 4.5 $6 5.4 $6 4.9 $6
Granted — — — — .9 8
Exercised (1.6) 7 (.6) 6 (.2) 4
Forfeited/expired (.3) 8 (.3) 9 (.2) 9
Balance, at end of year 2.6 6 4.5 6 5.4 6
Options exercisable at year-end 2.0 3.2 3.3
The following table summarizes information about stock options at December 31, 2004:
OPTIONS OUTSTANDING
OPTIONS EXERCISABLE
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE PRICES (IN MILLIONS) CONTRACTUAL LIFE EXERCISE PRICE (IN MILLIONS) EXERCISE PRICE
$ 1 – 3 1.0 2 $2 1.0 2
4 – 6 .1 4 6 .1 6
7 – 9 1.1 12 8 .6 8
10 – 12 .4 11 11 .3 11
13 – 19 — 8 18 — 18
2.6 2.0
Deferred Stock. Deferred stock incentive plan shares
granted to officers and key employees after 1990 generally vest
over 10 years in annual installments commencing one year
after the date of grant. Certain employees may elect to defer
payments until termination or retirement. We accrue compensation
expense on a straight-line basis over the vesting period
for the fair market value of the shares on the date of grant, less
estimated forfeitures. No shares were granted under this plan
in 2004. In 2003 and 2002, 45,000 and 23,000 shares,
respectively, were granted under this plan. The compensation
cost that has been charged against income for deferred stock
was not material for all periods presented. The weighted average
fair value per share granted during 2003 and 2002 was
$8.00 and $9.95, respectively. The implementation of SFAS
No. 123 had no impact on the calculation of compensation
expense for the deferred stock incentive plan.
Restricted Stock. From time to time, we award restricted stock
shares under the Comprehensive Plan to officers and key executives
to be distributed over the next three years in annual installments
based on continued employment and the attainment of
certain performance criteria. We recognize compensation
expense over the restriction period equal to the fair market value
of the shares issued, which is adjusted for fluctuation in the fair
market value of our common stock. The number of shares issued
is adjusted for forfeitures, and where appropriate, the level of
attainment of performance criteria. In 2004, 2003 and 2002,
11,000, 3,203,000 and 906,000 shares, respectively, of
restricted stock plan shares were granted to certain key employees
under these terms and conditions. No shares were forfeited in
2004 and approximately 1,006,000 and 34,000 shares,
respectively, were forfeited in 2003 and 2002. We recorded
compensation expense of approximately $23 million, $15 million
and $5 million, respectively, in 2004, 2003 and 2002
related to these awards. The weighted average grant date fair
value per share granted during each year was $12.50 in 2004,
$8.82 in 2003 and $10.49 in 2002. Under these awards,
2.3 million shares were outstanding at December 31, 2004.
In 2003, we also started a restricted stock program for our
upper-middle management with 40% of the shares automatically
vesting on the grant date, and the remaining 60% vesting
over two years, subject to continued employment. We recognize
compensation expense over the restriction period equal to the
fair market value of the shares issued, which is adjusted for fluctuation
in the fair market value of our common stock. The number
of shares granted is adjusted for the level of attainment of
performance criteria. During 2004, approximately 89,000
shares were granted under these terms and conditions that had a
weighted average grant date fair value of $12.53. Approximately
34,000 shares were issued and 8,000 shares were forfeited
during 2004. We recorded approximately $1 million of compensation
expense related to these shares. Under this award,
47,000 shares were outstanding at December 31, 2004.
Employee Stock Purchase Plan. Under the terms of the
employee stock purchase plan, eligible employees may purchase
common stock through payroll deductions at 90% of the lower of
market value at the beginning or end of the plan year, which runs
60
HOST MARRIOTT 2004